The State Insurance Regulatory Authority (SIRA) is proposing reforms to NSW’s compulsory home building compensation insurance scheme to support homeowners and reduce regulatory burdens and costs.
Inviting feedback on its discussion paper Home Building Compensation Reform, SIRA questions why businesses in the residential building industry must buy home building compensation insurance for each project they managed over $20,000 as a principal contractor.
“With increasing pressure in the housing construction market, some of the reform ideas would expand aspects of the scheme to provide greater coverage to homeowners,” SIRA said.
“Other reform ideas would narrow the scheme to reduce the cost of building work on homes,” it said.
“The consultation also considers who should provide cover in the scheme and how they should be regulated,” it said.
SIRA said the insurance scheme helped homeowners if the builder could not complete work on their home or honour statutory warranties.
Encouraging people to have their say before 16 August, Minister for Customer Service and Digital Government, Victor Dominello said that with almost 90,000 home building projects insured last year and increasing pressure in the housing construction market, the need for an effective insurance scheme had never been stronger.
“SIRA’s discussion paper proposes a range of reforms that offer clear steps to strengthening the scheme’s support for homeowners when their dreams don’t go to plan,” Mr Dominello said.
He said company failures had been proportionately higher in the construction industry compared to other industries: “In the 2021 calendar year, 24 per cent of total company insolvencies in NSW were in the construction industry.”
“Home Building Compensation is a complex insurance scheme which involves managing insolvency risks in an industry where those risks are inherent and longstanding,” the Minister said.
“As a result, the scheme was run at a loss for many years and has had a chequered history ever since the collapse of HIH Insurance in the early 2000s.”
Mr Dominello said key proposals under consideration included changing the amount of insurance cover; allowing homeowners to claim earlier in the dispute process; extending cover to victims of unlawfully uninsured home construction; updating the value of building work for which insurance was required; and changes to types of work that may be exempt from insurance.
SIRA’s Discussion Paper can be accessed at this PS News link with submissions to be lodged by 16 August 2022.
